Christopher Luxon and Nicola Willis. Photo: Nick Monro / RNZ
The prime minister cannot say whether National's coalition partners would support plans to break up the supermarket duopoly.
The government has made a formal Request for Information to help determine possible regulatory and legislative changes that would support a third entrant into the grocery sector.
Currently, Woolworths and Foodstuffs dominate the sector, and the government is not ruling out breaking them up or restructuring them.
Asked whether National could get ACT leader David Seymour's support to divest supermarkets, Christopher Luxon told Morning Report he would "worry about that down the road". Luxon said he had spoken to Seymour on the possibility, but the government would do the reviews first.
"He's part of Cabinet and we've had Cabinet conversations obviously on this topic, but what I'll just say to you is: it's important we get these two bits of work done, because I just want an exhaustive, comprehensive option set in front of us as to what would encourage a third entry into the market."
The government was also trying to attract foreign direct investment in a number of areas, but Luxon was not concerned investors may be put off if they saw government intervening to break up private companies.
"You're conflating two issues, really. We have a structural problem of competition in this particular sector, right? And we're a party that believes in competition. We want to see more competition, we want people to be able to come from overseas and compete.
"They want to know that the markets are competitive, that if they're going to come here and invest their capital that they're actually going to get a fair go, and actually it's going to be a level playing field."
Arena Williams laughed off criticism from Nicola Willis about Labour putting certain reform mechanisms on hold. Photo: RNZ
Economic Growth Minister Nicola Willis said all options were on the table.
"There are a number of options that have been suggested - one would be to almost wind back time to when New Zealand did have multiple competing supermarket chains by splitting up the current big businesses back into smaller brands," Willis told Morning Report .
"And if you look across the country, there's often a Pak'nSave, a New World and a Four Square. The problem is right now, they're not really competing with each other because they're owned by the same business.
"The same can be seen for the Woolworths Group, where you might have a Woolworths and a Supervalue, but they're not really competing because they're owned by the same business. So one option could be to demerge those entities."
A state-owned supermarket chain, however, was unlikely.
"I'm reluctant for the government to put an investment into owning or operating its own supermarket... And the reason for that is that actually, if this market were working effectively, then private businesses would want to invest - and I think that's preferable rather than taxpayers being on the hook for running a supermarket."
Woolworths and Foodstuffs are effectively the only two players in New Zealand's grocery sector. Photo: RNZ / Marika Khabazi, Simon Rogers
Labour gave cautious support to the government's plans, but said it was a "slow way to do it."
Its commerce and consumer affairs spokesperson Arena Williams said Labour had been working on both vertical integration and horizontal integration in the market.
"We brought in the market studies to make sure that we understood the state of play for our sector - that's information that the minister could be drawing on now, as well as a grocery commissioner to report on the kind of competition dynamics in the sector," Williams said.
"The report found that there isn't enough competition in the sector and it's not working as it should - that should be a clear call enough for the government to take more action now. And there are a range of steps that we could be bringing in to show that these reforms are serious, and that they have cross-partisan support."
But Luxon said the actions taken by the previous government's plan had not worked.
"Kiwis are paying too much and there isn't enough competition. And yes, subsequent governments have looked at it but we've got to get a comprehensive, exhaustive solution in place.
"When there is a market where there is insufficient competition and we think Kiwis are paying too much relative to others around the world, we have to exhaust all the options. We're not going to die wondering whether there was more for us to do to get Kiwis a better deal at the supermarket. It's the right thing to be doing, to make sure that we are exhausting all the options."
Luxon also hinted the supermarket sector might not be the last to be broken up.
"We've got a bunch of work separate to this going on with banks, and we've got that work in play at the moment. We want to be able to put more competition to that sector. We want more separation on the table there with banks."
Positive reaction
Consumer NZ had long said structural separation was the only way to solve the issue of getting a new entrant into the market, and was pleased with the government's plan.
Chief executive Jon Duffy said "it's really good to hear the minister indicate that's very much on the table, and she'll be working on getting a plan together for that, whilst other measures are in play".
When it came to the information gathering process, Duffy said the government had to be "really careful it follows a fair and measured process" due to the market power the incumbents have".
"They have big pockets, large resources. They will be able to litigate to try and stop any operation of their businesses.
"So the government needs to be really careful and measured in its approach, so as to reduce any litigation risk that might crop out of of a decision that they make, to separate the supermarkets."
Duffy had one reservation in the plan due to "hints that the government's hanging on to the idea the duopoly might self police here".
It was not likely the large chains would start offering groceries at fair prices, because "they probably would have done that by now", he said.
He also pointed to the government's option of using divestment powers in the Commerce Act that would see the large chains "carving off some of its operations and perhaps selling them to a third party."
"That's interesting, but I would caution against leaving the incumbents in charge of a process that they clearly don't want to do.
"Their behaviour post the market study shows they're only really interested in the status quo, or very minimal changes to the status quo. So it's my view that the government needs to step in with legislation."
Structural separation could look different depending on where the government lands, Duffy said.
"Currently, the duopoly controls all wholesale as well as retail. So separating wholesale from retail seems logical."
The duopoly had a massive footprint across the country, he said.
"There are some communities where there are plenty of supermarkets, they're just tied up in the hands of of the duopoly.
"So it could be that some separation at retail level would help a new entrant come in as well, knowing that they could take over those sites."
Duffy said a "combination of the two are probably the most appropriate next steps".
Duopoloy reaction
Woolworths declined an interview opportunity but the interim managing director Pieter de Wet said they had noted the announcement, and would consider it in detail.
It was proud to provide jobs for over 21,000 New Zealanders, de Wet said.
Woolworths was focused on giving their customers more value, convenience and a fantastic shopping experience, and they were committed to getting on with that, he said.
Foodstuffs said it would constructively participate in the government's request for information.
A Foodstuffs spokesperson said any changes by the government needed to deliver real benefits for customers, as well as strengthen the sector through a clear cost-benefit analysis for consumers.
Foodstuffs was keen to discuss how competition could be improved in ways that reduce costs, complexity and delays for all players in the market, while ensuring fairness for its hundreds of New Zealand family-owned businesses, it said.
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